Will Rightmove and Zoopla Ever Become iBuyers?

Property portals have always presented themselves to developers and estate agents as ‘marketplaces’ and ‘platforms’ that offer the property industry a sales channel, and to consumers as a one-stop ‘happy’ shop to find their future home.

This has been the bedrock of their success and both the foundation on which most of their marketing has been based and how agents and consumers understand them.

But a new portal model could be on its way from over the pond. In the US three large companies including a portal, Zillow, have begun rolling out ‘iBuyer’ services. These are platforms that buy homes for cash from vendors; the properties are then prepped for sale and sold, in Zillow’s case via its own property listings.

This model is having some success, but it’s still a tiny portion of the US property sales market at 0.2% and even in its most successful city, Phoenix, it has only taken 5% from traditional agents.

Money is being poured into iBuyer-style businesses in Europe, too. Finnish proptech start-up Kodit.io has just raised £11 million to roll out its version of the concept across the continent. It already has operations in Talinn and Madrid, and now plans to roll out its platform in Paris, Barcelona and Warsaw.

At a glance..

  • iBuyer home-buying is gaining traction in the US taking 0.2% of sales so far and in some markets, up to 5%.
  • US experiment is being headed up by property portal Zillow but also other services including Open Door.
  • Experts believe UK portals are unlikely in the short term to embrace the concept but could offer it as a chain-saving service for agents or as a standalone service.

But according to US-based portal market consultant Mike DelPrete, the iBuyer phenomenon in the states is part of a wider trend among all the world’s property portals, including the UK.

“Around the world these listing portals are getting closer to the transaction and getting involved in more parts of the transaction too,” he says.

And it’s happening within the UK. Zoopla’s move into agents software and utilities and providing industry data is a good example of a portal getting involved in more of the transaction, as is Rightmove’s recently launched Rent Ready Passport for tenants.

‘iBuyer-style’ services have form in the UK. Several high profile builders offer to purchase buyers’ original homes from them to facilitate sales, and hybrid mortgage lender cum estate agency Nested is, essentially, an iBuyer service.

“The reason portals want to move closer to, or into more of, the transaction is because that’s where they can grow in area such as finance, title insurance, removals, utilities, personal finances and agent commission,” says DelPrete.

In the UK, he says Zoopla is making the most obvious move into ‘more of the transaction’unlike Rightmove, which is dominant but happy to stay a marketplace.

Zoopla’s most recent initiative has been its backing of Zero Deposit, the alternative deposits platform set up by former Zoopla sales chief Jon Notley, which is now offered to member agents via the portal.

But will any of the UK portals go one step further and embrace the iBuyer model and could it take root in the UK? We asked four leading independent property industry experts and academics to pass judgement.

Mark Witherspoon, consultant to TwenctyCI, former Zoopla director and pioneer of AVM models.

“I have had dealings with both the US and UK property markets and I come at iBuyer from a slightly wary standpoint.

“It’s a model that can work well at certain parts of the cycle and in the US the “iBuyer is doing alright because stock turnover has stalled there and there’s pent-up demand from to sell their home in a slow market; my fear is to what extent has it been tested through the cycle from quiet to hot markets, and how does the model survive once a vendor realises the market is picking up? 

“The way this market could work in the UK is through a much better application of data to help identify those people who really need to move rather than those who ‘would like’ to move – although whether they are happy to take a discount is another matter.

“Also, this data needs to be used to make the UK market more fluid and less unwieldy and then, just maybe it will enable the likes of an iBuyer to operate effectively.

“At the moment, the length of time they would have to hold the property before selling it would probably defeat the financial dynamics of the model.

“One opportunity for portals would be to use an iBuyer service to help keep chains alive by the portal stepping in to save the chain and buy the ‘stuck’ property and sell it as an advantage to agents, and even a service.”

Professor Andrew Baum, Saïd Business School and proptech consultant

“There’s no reason why an iBuyer-style service couldn’t take off in the UK  and there are businesses that are already trying to do this, but it all revolves around the discount that’s applied to the price and how people feel about that.

“The evidence in the US is that there’s a double discount applied to market values – a fee and a conservative valuation.

“The big issue in the UK is what is the valuation when you’ve got a falling or weak market – how confident are people about the value that’s being placed on their property and can they tolerate the discount?

“I think only high interest rates and real difficulty in getting finance will persuade people to use an iBuyer service. With [the current] low interest rate environment I don’t think there are going to be that many people forced to take that discount.

“It works better in the buy-to-let and second homes markets, but I’m a bit dubious that people’s main asset are going to be sold at these big discounts in the current weak market.”

Ed Mead – co-founder of Viewber and former Douglas & Gordon exec

“All the portals have a very good reason for not being seen to compete with estate agents for sales; the risk would be to great,” he says.

“But what Rightmove, Zoopla and OnTheMarket do have now is substantial data about pricing so there’s no reason why they couldn’t develop something separate via a stand-alone brand using that data.

“And there are already a large number of ‘fast’ home buying services in the UK for people who will take a much lower offer on their property in return for the certainty that it gives them.

“And what the portals have done is to give these ‘fast’ home buying companies an outlet to market their properties that didn’t exist before.

These services have increased in number rapidly over the past 24 to 48 months as the sales market has struggled.”

Mike Day, business consultant and former Connells director

“I can see iBuyer sitting alongside traditional agents in the UK, but I don’t think the main portals will do it in the short term because Rightmove is incredibly conservative.

“But I think in the longer term it does need to do something innovative because it is stuck on a subscription model.

“Rightmove’s percentage growth over the past few years is, while still impressive,  slowing so they’ve got to find new income streams from somewhere.

“Zoopla has nailed its colours to the software approach and has been investing heavily in consolidating this and they will continue down that road, while OnTheMarket doesn’t have enough money to invest in something like iBuyer, or an appetite for it among its member agents.

“They’ve got more important things to concentrate on – like turning freebies into paying customers.

“The iBuyer model also has a greater chance of succeeding in the US, where overall fees are 5% compared to around 1% in the UK – so the margins are different.”

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